What changed in this filing

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Item 1. Financial Statements

2024-08-02 compared with 2024-05-03 · 226 added, 122 removed, 579 unchanged (38% of the section changed)

5 unchanged sentences

dollars, except per share data)

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 2024 2023

NET SALES (a)

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Interest expense 10.5 4.2 21.0 4.2

Other income (expense), net 0.2 ( 0.1 )

Other income, net 2.6 1.2 2.8 1.1

INCOME BEFORE INCOME TAXES 71.9 61.2 130.2 130.3

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Diluted earnings per share $ 0.67 $ 0.55 $ 1.22 $ 1.19

(a) Includes sales to related parties of $ 82.3 million for the three months ended March 31, 2024 compared with $ 89.1 million for the three months ended March 31, 2023.

(a) Includes sales to related parties of $ 17.4 million and $ 99.7 million for the three and six months ended June 30, 2024, respectively, compared with $ 87.2 million and $ 176.3 million for the three and six months ended June 30, 2023, respectively.

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

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(in millions of U.S.

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 2024 2023

NET INCOME $ 56.2 $ 46.2 $ 101.7 $ 98.9

1 unchanged sentence

Foreign currency translation adjustments ( 4.0 ) ( 3.0 ) ( 10.8 ) ( 2.1 )

Total other comprehensive (loss) income, net of tax ( 6.8 ) 0.9

Total other comprehensive loss, net of tax ( 4.0 ) ( 3.0 ) ( 10.8 ) ( 2.1 )

COMPREHENSIVE INCOME $ 52.2 $ 43.2 $ 90.9 $ 96.8

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Commitments and contingencies (Note 10)

Common stock, $ 0.0001 par value ( 2,000,000,000 shares authorized and 83,355,930 shares issued and outstanding as of March 31, 2024)

Common stock, $ 0.0001 par value ( 2,000,000,000 shares authorized and 83,359,426 shares issued and outstanding as of June 30, 2024)

Additional paid-in capital 56.2 49.7

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(in millions of U.S.

For the Three Months Ended March 31,

For the Six Months Ended June 30,

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

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Other, net ( 2.6 ) 1.6

Net cash (used in) provided by operating activities ( 8.2 ) 42.8

Net cash provided by operating activities 14.7 89.0

CASH USED IN INVESTING ACTIVITIES

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CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

Long-term debt proceeds — 650.0

Net transfers to Parent — ( 580.3 )

Net cash provided by (used in) financing activities — ( 36.4 )

Net decrease in cash and cash equivalents ( 18.8 ) —

Net cash provided by financing activities — 69.7

Net (decrease) increase in cash and cash equivalents ( 7.5 ) 139.6

Cash and cash equivalents at beginning of period 168.0 —

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Non-cash investing and financing activities:

Non-cash settlements with Parent $ — $ 29.4

Non-cash Capital expenditures $ ( 1.1 ) $ —

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Comprehensive

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Balances at April 01, 2024 $ — $ — $ 52.1 $ 132.7 $ ( 63.0 ) $ 121.8

Net income — — 56.2 — 56.2

Other comprehensive loss, net of tax — — — — ( 4.0 ) ( 4.0 )

Share-based awards — — 4.1 — — 4.1

Balances at June 30, 2024 $ — $ — $ 56.2 $ 188.9 $ ( 67.0 ) $ 178.1

Six Months Ended June 30, 2024

Balances at January 01, 2024 $ — $ — $ 49.7 $ 87.2 $ ( 56.2 ) $ 80.7

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Share-based awards — — 6.5 — — 6.5

Balances at March 31, 2024 $ — $ — $ 52.1 $ 132.7 $ ( 63.0 ) $ 121.8

Three Months Ended March 31, 2023

Balances at June 30, 2024 $ — $ — $ 56.2 $ 188.9 $ ( 67.0 ) $ 178.1

Three Months Ended June 30, 2023

Balances at April 01, 2023 $ — $ 527.7 $ — $ — $ ( 54.9 ) $ 472.8

Net income — 31.4 — 14.8 — 46.2

Other comprehensive loss, net of tax — — — — ( 3.0 ) ( 3.0 )

Net transfers to Parent — ( 559.1 ) 44.6 — — ( 514.5 )

Balances at June 30, 2023 $ — $ — $ 44.6 $ 14.8 $ ( 57.9 ) $ 1.5

Six Months Ended June 30, 2023

Balances at January 01, 2023 $ — $ 511.4 $ — $ — $ ( 55.8 ) $ 455.6

Net income — 84.1 — 14.8 — 98.9

Other comprehensive income, net of tax — — — — 0.9 0.9

Other comprehensive loss, net of tax — — — — ( 2.1 ) ( 2.1 )

Net transfers to Parent — ( 595.5 ) 44.6 — — ( 550.9 )

Balances at March 31, 2023 $ — $ 527.7 $ — $ — $ ( 54.9 ) $ 472.8

Balances at June 30, 2023 $ — $ — $ 44.6 $ 14.8 $ ( 57.9 ) $ 1.5

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

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Atmus estimates that approximately 19 % of its net sales in 2023 were generated through first-fit sales to OEMs, where its products are installed as components for new vehicles and equipment.

Atmus estimate that approximately 81 % of its net sales in 2023 were generated in the aftermarket, where its products are installed as replacement or repair parts, leading to a strong recurring revenue base.

Atmus estimates that approximately 81 % of its net sales in 2023 were generated in the aftermarket, where its products are installed as replacement or repair parts, leading to a strong recurring revenue base.

Building on its more than 65-year history, Atmus continues to grow and differentiate itself through its global footprint, comprehensive offering of premium products, technology leadership and multi-channel path to market.

In April 2022, Cummins Inc.

(“Cummins” or the “Parent”) announced its intention to separate its filtration business (the “Filtration Business”) into a standalone publicly traded company (the “Separation”).

(“Cummins”) announced its intention to separate its filtration business (the “Filtration Business”) into a standalone publicly traded company (the “Separation”).

In preparation for separation from Cummins, Atmus, as its predecessor in interest, was incorporated as a wholly-owned subsidiary of Cummins in Delaware on April 1, 2022 in connection with the planned Separation.

Prior to the completion of Atmus’ initial public offering (the “IPO”), Cummins completed, in all material respects, the transfer of the assets and liabilities of the Filtration Business to Atmus and its subsidiaries as detailed in the separation agreement Atmus entered into with Cummins.

On September 30, 2022, and as amended on February 15, 2023, Atmus entered into a $ 1.0 billion credit agreement (“Credit Agreement”) with Cummins and a syndicate of banks, providing for a $ 600 million term loan facility (the “term loan”) and a $ 400 million revolving credit facility (the “revolving credit facility”), in anticipation of the Separation.

On September 30, 2022, and as amended on February 15, 2023, Atmus entered into a $ 1.0 billion credit agreement (“Credit Agreement”) with a syndicate of banks, providing for a $ 600 million term loan facility (the “term loan”) and a $ 400 million revolving credit facility (the “revolving credit facility”), in anticipation of the Separation.

Borrowings under the Credit Agreement did not become available until the IPO occurred.

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As of the IPO Date

In connection with the Separation, we entered into various agreements with Cummins, including a separation agreement.

In connection with the Separation, Atmus entered into various agreements with Cummins, including a separation agreement.

In the separation agreement, there were certain assets and liabilities identified in the schedules, including leases and unrecognized tax liabilities, which were retained by Cummins and were reflected as Net Parent Investment in the Company’s Condensed Consolidated Financial Statements, and those that were transferred to the Company, including additional pension assets, other compensation obligations and certain other assets and liabilities, which were transferred to the Company through Net Parent Investment in the Company’s Condensed Consolidated Financial Statements.

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The Company incurred certain costs in its establishment as a standalone public company and expects to incur ongoing additional costs associated with operating as an independent, publicly traded company.

As a standalone entity, the Company will file tax returns on its own behalf, and tax balances and effective income tax rates may differ from the amounts reported in the historical periods.

Post IPO, Atmus filed a consolidated Federal income tax return and returns in certain other jurisdictions with Cummins.

Post IPO, Retained earnings began to accumulate and the balance reflected on the Condensed Consolidated Balance Sheets reflects earnings for the period May 26, 2023 through March 31, 2024.

Post IPO, Retained earnings began to accumulate and the balance reflected on the Condensed Consolidated Balance Sheets reflects earnings for the period May 26, 2023 through June 30, 2024.

Periods Post Full Separation

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Post Full Separation, Cummins is no longer considered a related party and activity post March 18, 2024, between Atmus and Cummins has been treated as arm’s-length transactions.

Atmus files tax returns in all jurisdictions on its own behalf post Full Separation.

Atmus files tax returns in all jurisdictions on its own behalf post Full Separation, and tax balances and effective income tax rates may differ from the amounts reported in the historical periods .

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates.

Recent Accounting Pronouncements Net Yet Adopted

Recent Accounting Pronouncements Not Yet Adopted

Segment Reporting (Topic 280):

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or loss and assets that are currently required annually.

Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker (“CODM”).

Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker.

The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments.

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A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements.

We expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows and financial condition.

We expect this ASU to impact our disclosures with no impact to our results of operations, cash flows or financial condition.

Income Taxes (Topic 740):

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The guidance does not affect recognition or measurement in our consolidated financial statements.

We expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows and financial condition.

We expect this ASU to impact our disclosures with no impact to our results of operations, cash flows or financial condition.

REVENUE FROM CONTRACTS WITH CUSTOMERS

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Net sales attributed to geographic areas were based on the location of the customer.

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 2024 2023

(in millions)

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The table below presents Atmus’ combined sales by product category:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 2024 2023

(in millions)

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Equity, royalty and interest income from investees, net of applicable taxes, was as follows:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 2024 2023

(in millions)

Fleetguard Filters Pvt.

$ 4.6 $ 5.0 $ 12.2 $ 10.8

Shanghai Fleetguard Filter Co.

Ltd 1.9 1.7 3.0 2.6

Filtrum Fibretechnologies Pvt.

Ltd 0.1 0.1 0.2 0.2

Atmus share of net income 6.6 6.8 15.4 13.6

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In connection with the Separation, the Company entered into a tax matters agreement with Cummins that, among other things, formalized our agreement related to the responsibility for historical tax positions for the period prior to the IPO for jurisdictions where our business was included in the consolidated or combined tax returns of Cummins.

Atmus’ effective tax rate for the three months ended March 31, 2024 , was 22.0 % .

Atmus’ effective tax rate for the three months ended March 31, 2023 , was 23.7 % .

Atmus’ effective tax rate for the three and six months ended June 30, 2024 , was 21.8 % and 21.9 %, respectively .

Atmus’ effective tax rate for the three and six months ended June 30, 2023 , was 24.5 % and 24.1 %, respectively .

The decrease in the effective tax rate was driven by a change in the mix of earnings among tax jurisdictions and discrete tax items.

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The Organization for Economic Co-operation and Development (“OECD”) introduced Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules that impose a global minimum tax rate of 15%.

Numerous countries have enacted legislation that is effective on January 1, 2024.

We have evaluated the impact of this legislation based on Atmus’ current global landscape and do not believe it will have a material impact.

Numerous countries have enacted legislation that is effective as of January 1, 2024.

We have evaluated the impact of this legislation based on Atmus’ current global landscape and have determined it will not have a material impact.

We will continue to update our analysis and monitor the ongoing legislation throughout the year.

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A tabular reconciliation of the product warranty liability, including accrued product campaigns, was as follows:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(in millions)

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Changes in estimates for pre-existing product warranties ( 0.3 ) ( 1.3 )

Foreign currency translation and other ( 0.1 ) ( 0.2 )

Balance, end of period $ 13.9 $ 16.1

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DEBT AND BORROWING ARRANGEMENTS

Atmus entered into the Credit Agreement with Cummins and a syndicate of banks, providing for a "term loan” and a revolving credit facility, in anticipation of the Separation.

Atmus entered into the Credit Agreement with a syndicate of banks, providing for a "term loan” and a revolving credit facility, in anticipation of the Separation.

Borrowings under the Credit Agreement did not become available under the Credit Agreement until the IPO occurred.

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dollar-denominated loans bear interest at an adjusted term Secured Overnight Financing Rate (“SOFR”) (which includes a 0.1 percent credit spread adjustment to SOFR) for the applicable interest period plus a rate ranging from 1.125 percent to 1.75 percent depending on Atmus’ net leverage ratio.

As of March 31, 2024, $ 600 million has been drawn on the term loan and no amount was drawn on the revolving credit facility.

As of June 30, 2024, $ 600 million has been drawn on the term loan and no amount was drawn on the revolving credit facility.

These amounts are included within Long-term debt and Current maturities of long-term debt on the Balance Sheet.

As of March 31, 2024, Atmus’ fair value of Long-term debt was approximately $ 588 million, which was derived from Level 2 input measures.

Our credit lines available as of March 31, 2024 and December 31, 2023 include:

As of March 31, 2024 As of December 31, 2023

As of June 30, 2024, Atmus’ fair value of Long-term debt was approximately $ 600 million, which was derived from Level 2 input measures.

Our credit lines available as of June 30, 2024 and December 31, 2023 include:

As of June 30, 2024 As of December 31, 2023

Facility Amount Borrowed Amount Facility Amount Borrowed Amount

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The Credit Agreement includes financial covenants that Atmus maintain certain net leverage, secured net leverage and interest coverage ratios.

At March 31, 2024, Atmus was in compliance with all financial covenants under the Credit Agreement.

At June 30, 2024, Atmus was in compliance with all financial covenants under the Credit Agreement.

The Credit Agreement also contains customary representations, events of default and covenants, including restrictions on the level of borrowing.

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ACCUMULATED OTHER COMPREHENSIVE LOSS

Following are the changes in Accumulated other comprehensive (loss) income by component for the three months ended March 31, 2024 and March 31, 2023 :

For the Three Months Ended March 31,

Following are the changes in Accumulated other comprehensive (loss) income by component for the three and six months ended June 30, 2024 and June 30, 2023 :

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 2024 2023

(in millions)

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Currency translation adjustments ( 4.0 ) ( 3.0 ) ( 10.8 ) ( 2.1 )

Other comprehensive (loss) income, net ( 6.8 ) 0.9

Other comprehensive loss, net ( 4.0 ) ( 3.0 ) ( 10.8 ) ( 2.1 )

Balance at end of period ( 66.9 ) ( 58.8 ) ( 66.9 ) ( 58.8 )

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Balance at beginning of period $ ( 0.1 ) $ 0.9 $ ( 0.1 ) $ 0.9

Change in pensions and other benefit plans — —

Tax (expense)/benefit — —

Other comprehensive income (loss), net — — — —

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Balance at beginning of period $ ( 63.0 ) $ ( 54.9 ) $ ( 56.2 ) $ ( 55.8 )

Total other comprehensive (loss) income, net ( 6.8 ) 0.9

Total other comprehensive loss, net ( 4.0 ) ( 3.0 ) ( 10.8 ) ( 2.1 )

Balance at end of period $ ( 67.0 ) $ ( 57.9 ) $ ( 67.0 ) $ ( 57.9 )

RELATIONSHIP WITH PARENT AND RELATED PARTIES

RELATIONSHIP WITH RELATED PARTIES

As described in Note 1, Description of the Business , prior to the IPO, Atmus had been managed and operated in the normal course of business with other subsidiaries of Cummins.

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In addition, the expenses reflected in the Condensed Consolidated Financial Statements may not be indicative of expenses that will be incurred in the future by Atmus.

The Company entered into the separation agreement and transition services agreement with Cummins, among other transaction agreements, all of which will govern the parties relationship following the IPO and full separation.

This includes services provided by Cummins to the Company for a fixed term on a service-by-service basis.

We will pay Cummins mutually agreed-upon fees for the services provided under the transition services agreement.

The Company entered into the separation agreement and transition services agreement with Cummins, among other transaction agreements, all of which govern the parties’ relationship following the IPO and full separation.

This relationship includes services provided by Cummins to the Company for a fixed term on a service-by-service basis.

We pay Cummins mutually agreed-upon fees for the services provided under the transition services agreement.

Corporate Costs/Allocations

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All corporate charges and allocations have been deemed paid by Atmus to Cummins in the period in which the cost was recognized in the Condensed Consolidated Statements of Income.

Total corporate costs allocated to Atmus were zero for the three months ended March 31, 2024 compared with $ 8.2 million for the three months ended March 31, 2023.

Total corporate costs allocated to Atmus were zero for the three and six months ended June 30, 2024 compared with $ 5.5 million and $ 13.7 million for the three and six months ended June 30, 2023, respectively.

Allocated corporate costs are included in Net sales, Cost of sales, Selling, general and administrative expenses, Research, de velopment and engineering expenses and Other income, net.

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Related Party Balances

Following the full separation and as of March 31, 2024, Cummins is no longer considered a related party.

Following the full separation, Cummins is no longer considered a related party.

Atmus had trade receivables of $ 37.9 million for products sold to, and accounts payable of $ 54.8 million for products and services purchased in the ordinary course from Cummins as of December 31, 2023 .

Atmus’ sales to Cummins from January 1, 2024 through the date of full separation, March 18, 2024, were $ 65.4 million compared to $ 76.7 million for the three months ended March 31, 2023 .

Atmus’ sales to Cummins from January 1, 2024 through the date of full separation, March 18, 2024, were $ 65.4 million compared to $ 72.7 million and $ 149.4 million for the three and six months ended June 30, 2023, respectively .

EARNINGS PER SHARE

Basic and diluted earnings per share (“EPS”) were calculated as follows:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 2024 2023

(in millions, except per share data)

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Diluted earnings per share $ 0.67 $ 0.55 $ 1.22 $ 1.19

Basic and diluted earnings per share for the three months ended March 31, 2024 was calculated using the shares of common stock that were issued and outstanding as of the completion of the IPO.

Basic and diluted earnings per share for the three and six months ended June 30, 2024 was calculated using the shares of common stock that were issued and outstanding as of the completion of the IPO.

For the periods prior to the IPO, it is assumed that there were no dilutive equity instruments as there were no equity awards of Atmus outstanding prior to the IPO.

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Other liabilities $ 40.6 $ 31.8

SUBSEQUENT EVENTS

On July 17, 2024, Atmus’ Board of Directors declared a quarterly cash dividend of $ 0.05 per share of Common Stock.

This dividend is payable on August 14, 2024, to shareholders of record at the close of business on August 1, 2024.

The declaration of dividends is subject to the discretion of our Board of Directors and depends on various factors, including our Net income, financial condition, cash requirements, future prospects and other factors that our Board of Directors deems relevant to its analysis and decision making.

On July 17, 2024, Atmus’ Board of Directors authorized a $ 150 million share repurchase program.

Under the share repurchase program, the Company’s common shares may be repurchased in the open market or in privately negotiated transactions, at prices that the Company deems appropriate and subject to numerous factors, including share price, trading volume, general market conditions, applicable law and other factors deemed relevant by the Company.

The program does not have an expiration date and may be suspended or discontinued at any time.

No shares have been repurchased through the filing of this Quarterly Report on Form 10-Q.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

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The discussion and analysis presented below refers to and should be read in conjunction with the unaudited condensed consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q.

The following is our discussion and analysis of changes in our financial condition and results of operations for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 .

The following is our discussion and analysis of changes in our financial condition and results of operations for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 .

Cautionary Note Regarding Forward-Looking Statements

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These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which we refer to as “future factors,” which are difficult to predict.

If the underlying assumptions prove correct, or known or unknown risks or uncertainties materialize, our actual outcomes, results and financial condition may differ materially from what is expressed, implied or forecasted in such forward-looking statements.

If the underlying assumptions prove inaccurate, or known or unknown risks or uncertainties materialize, our actual outcomes, results and financial condition may differ materially from what is expressed, implied or forecasted in such forward-looking statements.

Risks and uncertainties include, but are not limited to:

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• Potential indemnification liabilities to Cummins pursuant to the separation agreement;

• Potential liability for responsibilities that Cummins agreed to indemnify Atmus for pursuant to the separation agreement;

• Agreements with Cummins that do not reflect terms from arm’s-lengths negotiations between unaffiliated third parties;

• Changes in capital and credit markets;

• Substantial indebtedness from Atmus’ term loan, which may impact Atmus’ ability to service all its indebtedness and react to changes in the industry;

• Substantially all Atmus' assets being pledged as security for its term loan and revolving credit facility.

Additional information about these future factors and the material factors or assumptions underlying such forward-looking statements may be found under the section entitled Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023.

• Substantially all of Atmus’ assets being pledged as security for its term loan and revolving credit facility;

• The price of Atmus’ common stock may fluctuate substantially;

• The extent to which Atmus will pay dividends or the timing or amount of such dividends;

• Applicable laws and regulations, provisions of Atmus’ amended and restated certificate of incorporation and bylaws and certain contractual rights granted to Cummins that may discourage takeover attempts;

• The designation of the Court of Chancery in the State of Delaware and the federal district courts for the District of Delaware as the exclusive forums for certain types of lawsuits;

• Atmus’ historical consolidated financial statements are not necessarily representative of the results Atmus would have achieved as a standalone company;

• The obligations associated with being an independent, publicly traded company will require significant resources and management attention.

It is not possible to predict or identify all such factors, and the risks described above should not be considered a complete statement of all potential risks and uncertainties.

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Our Registration Statement on Form S-1, as amended, filed on May 16, 2023, was declared effective on May 25, 2023, and our common shares began trading on the New York Stock Exchange under the symbol “ATMU” on May 26, 2023.

On May 30, 2023, the IPO was completed through Cummins’ exchange of 16,243,070 shares of our common stock, including the underwriters’ full exercise of their option to purchase 2,118,661 shares to cover over-allotments.

On May 30, 2023, the IPO was completed through Cummins’ exchange of 16,243,070 shares of our common stock, including the underwriters’ full exercise of their option to purchase

2,118,661 shares to cover over-allotments.

None of the proceeds of the IPO were for the benefit of Atmus.

As of the closing of the IPO, Cummins owned approximately 80.5% of the outstanding shares of our common stock.

On September 30, 2022, and as amended on February 15, 2023, Atmus entered into a $1.0 billion credit agreement (“Credit Agreement”) with Cummins and a syndicate of banks, providing for a $600 million term loan facility (the “term loan”) and a $400 million revolving credit facility (the “revolving credit facility”), in anticipation of the Separation.

On September 30, 2022, and as amended on February 15, 2023, Atmus entered into a $1.0 billion credit agreement (“Credit Agreement”) with a syndicate of banks, providing for a $600 million term loan facility (the “term loan”) and a $400 million revolving credit facility (the “revolving credit facility”), in anticipation of the Separation.

Borrowings under the Credit Agreement did not become available until the IPO occurred.

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On February 14, 2024, Cummins announced an exchange offer whereby Cummins shareholders could exchange all or a portion of Cummins common stock for shares of Atmus common stock owned by Cummins.

The divestiture of Atmus shares by Cummins was completed on March 18, 2024 and resulted in the full

separation of Atmus and divestiture of Cummins’ entire ownership and voting interest in Atmus (“Full Separation”).

The divestiture of Atmus shares by Cummins was completed on March 18, 2024 and resulted in the full separation of Atmus and divestiture of Cummins’ entire ownership and voting interest in Atmus (“Full Separation”).

Basis of Presentation

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Market demand

Aftermarket and first-fit demand remained stable during the first quarter of 2024.

In 2024, we expect first-fit demand to soften across many of our key markets whereas the aftermarket is expected to recover, particularly in the second half of 2024.

We have continued to increase prices as a result of continued inflation and increases to our cost base, which has contributed to higher net sales in the three months ended March 31, 2024 .

Supply chain constraints

We continued to encounter supply chain challenges which impact our ability to meet customer demand.

While overall supply chain conditions have substantially improved from a year ago, they continue to affect inventory and backlog levels throughout our supply chain.

Our management team continues to monitor and evaluate all of these factors and the related impacts on our business and operations and we are diligently working to minimize any supply chain impacts to our business and to our customers.

Aftermarket demand remained depressed in the first half of 2024 reflecting soft market conditions.

It is uncertain if a recovery can be expected in the second half of 2024.

First-fit demand remained stable during the first half of 2024.

In the second half of 2024, we expect first-fit demand to soften across many of our key markets.

Global supply chain

While overall supply chain conditions continue to affect inventory and backlog levels, they have largely stabilized from a year ago with minimal disruptions now being experienced and backorders largely recovered in the first half of 2024.

Our management team continues to monitor and evaluate all of these factors and the

related impacts on our business and operations and we are diligently working to continue to minimize any supply chain impacts to our business and to our customers.

Commodity prices, labor, inflation and foreign currency exchange rates

We continue to experience generally high inflation in the first quarter of 2024.

We continued to experience generally high inflation in the first half of 2024.

Direct material cost pressures, driven largely by steel, resin and other petrochemical products, have stabilized, but we continue to see impacts from labor.

Collectively, we incurred higher freight and manufacturing costs resulting in an increase in Cost of sales in the first quarter of 2024.

To mitigate these pressures, we continued to institute pricing actions into the first quarter of 2024.

During the first quarter of 2024, our Selling, general and administrative expenses increased as a result of increased people-related expenses and consulting.

Additionally, the depreciation of the U.S.

dollar against foreign currencies has had and could continue to have a favorable impact on our condensed consolidated results of operations due to translation impacts.

Although we did see a slightly favorable impact on our results of operations in the first quarter of 2024, there can be no assurances that this favorable impact will continue throughout 2024 .

During the first six months of 2024, our Selling, general and administrative expenses increased as a result of increased people-related and consulting expenses.

Additionally, the appreciation of the U.S.

dollar against foreign currencies had a slightly unfavorable impact on our condensed consolidated results of operations in the first half of 2024 due to translation impacts;

there can be no assurances that this trend will continue throughout 2024 .

Standalone costs

We have incurred, and expect to continue to incur, additional costs associated with becoming a standalone public company.

During the three months ended March 31, 2024 , we incurred approximately $6.0 million of one-time expenses including $3.3 million within Cost of sales and $2.7 million within Selling, general and administrative expenses.

During the three months ended June 30, 2024 , we incurred approximately $3.8 million of one-time expenses including $(0.3) million within Cost of sales and $4.1 million within Selling, general and administrative expenses.

During the six months ended June 30, 2024 , we incurred approximately $9.8 million of one-time expenses including $3.0 million within Cost of sales and $6.8 million within Selling, general and administrative expenses.

We expect to incur one-time expenses of approximately $10 million to $20 million in 2024 in connection with becoming a standalone public company.

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Results of Operations

Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

For the Three Months Ended March 31, Favorable

Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023

For the Three Months Ended June 30, Favorable

(Unfavorable)

12 unchanged sentences

Interest expense 10.5 4.2 (6.3) (150.0) %

Other income (expense), net

Other income, net

2.6 1.2 1.4 116.7 %

5 unchanged sentences

Diluted earnings per share $ 0.67 $ 0.55 $ 0.12 21.1 %

For the Three Months Ended March 31, Favorable

For the Three Months Ended June 30, Favorable

(Unfavorable)

3 unchanged sentences

Research, development and engineering expenses 2.4% 3.0% 0.6

Net sales were $426.6 million for the three months ended March 31, 2024 , an increase of $8.0 million compared to $418.6 million for the three months ended March 31, 2023 .

The increase in Net sales was mainly due to $8.8 million of favorable pricing impacts and the favorable impacts of currency of $1.4 million, partially offset by lower volumes of approximately $2.2 million.

Gross margin was $111.8 million for the three months ended March 31, 2024 , an increase of $2.0 million compared to $109.8 million for the three months ended March 31, 2023 .

The increase in Gross margin was mainly due to approximately $8.8 million of favorable pricing as described above, $2.4 million of favorable commodities costs and $0.1 million of favorable currency impacts, partially offset by $4.6 million increase in manufacturing and other costs, $2.3 million in one-time separation costs, $1.6 million in unfavorable freight costs and $0.8 million in lower volumes.

Gross margin as a percentage of Net sales was 26.2% for the three months ended March 31, 2024 and for the three months ended March 31, 2023 .

Net sales were $432.6 million for the three months ended June 30, 2024 , an increase of $19.0 million compared to $413.6 million for the three months ended June 30, 2023 .

The increase in Net sales was mainly due to higher volumes of approximately $11.8 million and $7.9 million of favorable pricing impacts, partially offset by the unfavorable impacts of currency of $0.6 million.

Gross margin was $131.9 million for the three months ended June 30, 2024 , an increase of $17.5 million compared to $114.4 million for the three months ended June 30, 2023 .

The increase in Gross margin was mainly due to approximately $7.9 million of favorable pricing as described above, higher volumes of approximately $4.1 million, lower one-time separation costs of $2.8 million, $1.8 million of favorable commodities and freight costs and a $1.2 million decrease in manufacturing and other costs, partially offset by $0.3 million in unfavorable currency impacts.

Gross margin as a percentage of Net sales was 30.5% for the three months ended June 30, 2024 and 27.7% for the three months ended June 30, 2023 .

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $43.3 million for the three months ended March 31, 2024 , an increase of $4.2 million compared to $39.1 million for the three months ended March 31, 2023 .

The increase was primarily driven by increased people-related expenses and consulting, partially offset by lower one-time separation costs of $0.4 million.

Selling, general and administrative expenses as a percentage of Net sales were 10.2% for the three months ended March 31, 2024 , an increase of 0.9 percentage points compared to 9.3% for the three months ended March 31, 2023 .

Selling, general and administrative expenses were $49.1 million for the three months ended June 30, 2024 , an increase of $3.1 million compared to $46.0 million for the three months ended June 30, 2023 .

The increase was primarily driven by increased people-related and consulting expenses, partially offset by lower one-time separation costs of $2.0 million.

Selling, general and administrative expenses as a percentage of Net sales were 11.3% for the three months ended June 30, 2024 , an increase of 0.2 percentage points compared to 11.1% for the three months ended June 30, 2023 .

The increase in Selling, general and administrative expenses as a percentage of Net sales was primarily driven by the items noted above increasing at a higher rate in relation to the increase in Net sales.

Research, Development and Engineering Expenses

Research, development and engineering expenses were $10.1 million for the three months ended March 31, 2024 , an increase of $0.3 million compared to $9.8 million for the three months ended March 31, 2023 .

The increase was primarily due to increased people-related expenses.

Research, development and engineering expenses as a percentage of Net sales were 2.4% for the three months ended March 31, 2024 , an increase of 0.1 percentage points compared to 2.3% for the three months ended March 31, 2023 .

The increase in Research, development and engineering expenses as a percentage of Net sales was mainly due to the item noted above.

Research, development and engineering expenses were $10.4 million for the three months ended June 30, 2024 , a decrease of $1.9 million compared to $12.3 million for the three months ended June 30, 2023 .

The decrease was primarily due to standalone costs being favorable to previously allocated expenses under Cummins.

Research, development and engineering expenses as a percentage of Net sales were 2.4% for the three months ended June 30, 2024 , a decrease of 0.6 percentage points compared to 3.0% for the three months ended June 30, 2023 .

The decrease in Research, development and engineering expenses as a percentage of Net sales was mainly due to the item noted above.

Equity, Royalty and Interest Income From Investees

Equity, royalty and interest income from investees were $10.4 million for the three months ended March 31, 2024 , an increase of $2.0 million compared to $8.4 million for the three months ended March 31, 2023 .

The increase was due to higher earnings of $2.0 million from our joint ventures, primarily in India.

Equity, royalty and interest income from investees was $8.2 million for the three months ended June 30, 2024 , a decrease of $0.1 million compared to $8.3 million for the three months ended June 30, 2023, due to lower earnings from our joint ventures, primarily in India.

Interest Expense

Interest expense was $10.5 million for the three months ended March 31, 2024 , an increase of $10.5 million compared to zero for the three months ended March 31, 2023 .

The increase was primarily due to interest on our borrowings under the Credit Agreement beginning with our IPO in May 2023.

Interest expense was $10.5 million for the three months ended June 30, 2024 , an increase of $6.3 million compared to $4.2 million for the three months ended June 30, 2023 .

The increase in Interest expense was primarily due to interest on our borrowings under the Credit Agreement beginning with our IPO in May 2023.

Income Tax Expense

In connection with the Separation, the Company entered into a tax matters agreement with Cummins that among other things, formalized our agreement related to the responsibility for historical tax positions for the period prior to the IPO for jurisdictions where our business was included in the consolidated or combined tax returns of Cummins.

Our effective tax rate for the three months ended March 31, 2024 was 22.0% , a decrease of 1.7 percentage points compared to 23.7% for the three months ended March 31, 2023 .

In connection with the Separation, we entered into a tax matters agreement with Cummins that among other things, formalized our agreement related to the responsibility for historical tax positions for the period prior to the IPO for jurisdictions where our business was included in the consolidated or combined tax returns of Cummins.

Our effective tax rate for the three months ended June 30, 2024 was 21.8% , a decrease of 2.7 percentage points compared to 24.5% for the three months ended June 30, 2023 .

The decrease in the effective tax rate was driven by a change in the mix of earnings among tax jurisdictions and discrete tax items.

Our effective tax

rate differs from the U.S.

Our effective tax rate differs from the U.S.

statutory rate primarily due to differences in rates applicable to foreign subsidiaries, withholding taxes and state income taxes.

Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

For the Six Months Ended June 30, Favorable

(Unfavorable)

2024 2023 Amount %

(in millions)

NET SALES $ 859.2 $ 832.2 $ 27.0 3.2 %

Cost of sales 615.5 608.0 (7.5) (1.2) %

GROSS MARGIN 243.7 224.2 19.5 8.7 %

OPERATING EXPENSES AND INCOME

Selling, general and administrative expenses 92.4 85.1 (7.3) (8.6) %

Research, development and engineering expenses 20.5 22.1 1.6 7.2 %

Equity, royalty and interest income from investees 18.6 16.7 1.9 11.4 %

Other operating expense, net 1.0 0.3 0.7 233.3 %

OPERATING INCOME 148.4 133.4 15.0 11.2 %

Interest expense 21.0 4.2 (16.8) (400.0) %

Other income, net 2.8 1.1 1.7 154.5 %

INCOME BEFORE INCOME TAXES 130.2 130.3 (0.1) (0.1) %

Income tax expense 28.5 31.4 2.9 9.2 %

NET INCOME $ 101.7 $ 98.9 $ 2.8 2.8 %

PER SHARE DATA:

Basic earnings per share $ 1.22 $ 1.19 $ 0.03 2.7 %

Diluted earnings per share $ 1.22 $ 1.19 $ 0.03 2.3 %

For the Six Months Ended June 30, Favorable

(Unfavorable)

Percent of Net sales 2024 2023 Percentage Points

Gross margin 28.4% 26.9% 1.5

Selling, general and administrative expenses 10.8% 10.2% (0.6)

Research, development and engineering expenses 2.4% 2.7% 0.3

Net sales were $859.2 million for the six months ended June 30, 2024 , an increase of $27.0 million compared to $832.2 million for the six months ended June 30, 2023 .

The increase in Net sales was mainly due to $16.7 million of favorable pricing impacts, higher volumes of $9.6 million and the favorable impacts of currency of $0.8 million.

Gross margin was $243.7 million for the six months ended June 30, 2024 , an increase of $19.5 million compared to $224.2 million for the six months ended June 30, 2023 .

The increase in Gross margin was mainly due to approximately $16.7 million of favorable pricing as described above, higher volumes of approximately $3.3 million, $2.6 million of favorable commodities and freight costs and $0.5 million of lower one-time separation costs, partially offset by higher manufacturing and other costs of $3.4 million and $0.2 million in unfavorable currency impacts.

Gross margin as a percentage of Net sales was 28.4% for the six months ended June 30, 2024 , an increase of 1.5 percentage points compared to 26.9% for the six months ended June 30, 2023 .

The increase in Gross margin as a percentage of Net sales was primarily due to the items noted above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $92.4 million for the six months ended June 30, 2024 , an increase of $7.3 million compared to $85.1 million for the six months ended June 30, 2023 .

The increase was primarily driven by increased people-related and consulting expenses, partially offset by lower one-time separation costs of $2.4 million.

Selling, general and administrative expenses as a percentage of Net sales were 10.8% for the six months ended June 30, 2024 , an increase of 0.6 percentage points compared to 10.2% for the six months ended June 30, 2023 .

Research, Development and Engineering Expenses

Research, development and engineering expenses were $20.5 million for the six months ended June 30, 2024 , a decrease of $1.6 million compared to $22.1 million for the six months ended June 30, 2023 .

The decrease was primarily due to standalone costs being favorable to previously allocated expenses under Cummins.

Research, development and engineering expenses as a percentage of Net sales were 2.4% for the six months ended June 30, 2024 , a decrease of 0.3 percentage points compared to 2.7% for the six months ended June 30, 2023 .

The decrease in Research, development and engineering expenses as a percentage of Net sales was mainly due to the items noted above.

Equity, Royalty and Interest Income from Investees

Equity, royalty and interest income from investees was $18.6 million for the six months ended June 30, 2024 , an increase of $1.9 million compared to $16.7 million for the six months ended June 30, 2023 .

The increase was primarily due to higher earnings of $1.9 million from our joint ventures in India and China.

Other Operating Expense, Net

Other operating expense, net was $1.0 million for the six months ended June 30, 2024 , an increase of $0.7 million compared to $0.3 million for the six months ended June 30, 2023 .

Interest Expense

Interest expense was $21.0 million for the six months ended June 30, 2024 , an increase of $16.8 million compared to $4.2 million for the six months ended June 30, 2023 .

The increase in Interest expense was primarily due to the interest on our borrowings under the Credit Agreement beginning with our IPO in May 2023.

Other Income, Net

Other income, net was $2.8 million for the six months ended June 30, 2024 , an increase of $1.7 million compared to $1.1 million for the six months ended June 30, 2023 .

The increase in Other income, net was primarily due to higher interest income.

Income Tax Expense

In connection with the Separation, we entered into a Tax Matters Agreement with Cummins that among other things, formalized our agreement related to the responsibility for historical tax positions for the period prior to the IPO for jurisdictions where our business was included in the consolidated or combined tax returns of Cummins.

Our effective tax rate for the six months ended June 30, 2024 was 21.9% , a decrease of 2.2 percentage points compared to 24.1% for the six months ended June 30, 2023 .

The decrease in the effective tax rate was driven by a change in the mix of earnings among tax jurisdictions and discrete tax items.

Our effective tax rate differs from the U.S.

statutory rate primarily due to differences in rates applicable to foreign subsidiaries, withholding taxes and state income taxes.

Liquidity and Capital Resources

Our facilities under the Credit Agreement provide for $1.0 billion in total availability, which includes a $600 million term loan and a $400 million revolving credit facility.

As of March 31, 2024, we have borrowed $600.0 million on the term loan and zero on the revolving credit facility.

As a result, we had capacity under our revolving credit facility of $400.0 million as of March 31, 2024.

As of June 30, 2024, we have outstanding

borrowings of $600 million on the term loan and zero on the revolving credit facility.

As a result, we had capacity under our revolving credit facility of $400 million as of June 30, 2024.

We believe that cash from operations and the facilities under our Credit Agreement will continue to provide sufficient liquidity for our working capital needs, planned capital expenditures and future payments of our contractual, tax and benefit plan obligations in both the short and long term.

6 unchanged sentences

Our cash flow activity is noted below:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(in millions)

Net cash (used in) provided by operating activities

Net cash provided by operating activities

$ 14.7 $ 89.0

Net cash used in investing activities (22.2) (19.1)

Net cash provided by (used in) financing activities — (36.4)

Net cash provided by financing activities

Operating Cash Flow

Net cash used in operating activities was $8.2 million for the three months ended March 31, 2024 , a decrease of $51.0 million compared to Net cash provided by operating activities of $42.8 million for the three months ended March 31, 2023 .

The decrease was driven primarily by higher working capital requirements of $46.1 million and a decrease in Net income of $7.2 million .

During the three months ended March 31, 2024 , higher working capital requirements resulted in a cash outflow of $59.1 million compared to a cash outflow of $13.0 million for the three months ended March 31, 2023 , mainly due to lower other accrued expenses, driven by variable compensation of $23.7 million and one-time working capital inefficiencies associated with the move from intercompany settlement terms with Cummins to standalone practices of $3.3 million, higher trade receivables and lower trade payables.

Dividends received from our unconsolidated equity investees were $9.6 million and zero for the three months ended March 31, 2024 and March 31, 2023 , respectively.

Net cash provided by operating activities was $14.7 million for the six months ended June 30, 2024 , a decrease of $74.3 million compared to Net cash provided by operating activities of $89.0 million for the six months ended June 30, 2023 .

The decrease was driven primarily by higher working capital requirements of $68.0 million .

During the six months ended June 30, 2024 , higher working capital requirements resulted in a cash outflow of $91.7 million compared to a cash outflow of $23.7 million for the six months ended June 30, 2023 , mainly due to lower other accrued expenses, driven by variable compensation of $23.7 million and one-time working capital inefficiencies associated with the move from intercompany settlement terms with Cummins to standalone practices of $21.6 million, higher inventories and higher trade receivables.

Dividends received from our unconsolidated equity investees were $9.6 million and $14.8 million for the six months ended June 30, 2024 and June 30, 2023 , respectively.

During the first quarter of 2024, we received a partial dividend from our joint venture in India which is included in Net cash used in operating activities.

Investing Cash Flow

Net cash used in investing activities for the three months ended March 31, 2024 and March 31, 2023 was primarily used for capital expenditures.

Our capital expenditures were $10.6 million (of which approximately $2.8 million related to one-time separation costs) and $6.4 million for the three months ended March 31, 2024 and March 31, 2023 , respectively, corresponding to approximately 2.5% of Net sales for the three months ended March 31, 2024 and approximately 1.5% of Net sales for the three months ended March 31, 2023 .

Net cash used in investing activities for the six months ended June 30, 2024 and June 30, 2023 was primarily used for capital expenditures.

Our capital expenditures were $22.2 million (of which approximately $7.3 million related to one-time separation costs) and $19.1 million for the six months ended June 30, 2024 and June 30, 2023 , respectively, corresponding to approximately 2.6% of Net sales for the six months ended June 30, 2024 and approximately 2.3% of Net sales for the six months ended June 30, 2023 .

Financing Cash Flow

Net cash provided by financing activities for the three months ended March 31, 2024 was zero and Net cash used in financing activities for the three months ended March 31, 2023 was $36.4 million .

Net cash used in financing activities for the three months ended March 31, 2023 consisted entirely of transfers to Cummins.

Net cash provided by financing activities for the six months ended June 30, 2024 was zero and Net cash provided by financing activities for the six months ended June 30, 2023 was $69.7 million .

Net cash provided by financing activities for the six months ended June 30, 2023 consisted primarily of long-term debt proceeds from our borrowings of $650 million under our Credit Agreement, partially offset by net transfers of $580.3 million to Cummins as part of the Separation.

Contractual Obligations

1 unchanged sentence

For more information regarding our lease obligations, see Note 9, Leases , to the historical consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, which provides a summary of our future minimum lease payments.

Our total debt was $600.0 million at both March 31, 2024 and December 31, 2023 .

At March 31, 2024 , the weighted-average term of our outstanding long-term debt was 3.4 years.

Our total debt was $600 million at both June 30, 2024 and December 31, 2023 .

At June 30, 2024 , the weighted-average term of our outstanding long-term debt was 3.4 years.

Refer to Note 9, Debt and Borrowing Arrangements , to the Condensed Consolidated Financial Statements for more information on our debt and debt covenants.

34 unchanged sentences

A reconciliation of Net income to EBITDA and Adjusted EBITDA is shown in the table below:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 2024 2023

(in millions)

5 unchanged sentences

One-time separation costs (a)

$ 3.8 $ 8.8 $ 9.8 $ 12.9

Adjusted EBITDA (non-GAAP) $ 92.5 $ 79.7 $ 172.7 $ 158.3

5 unchanged sentences

A reconciliation of Diluted earnings per share to Adjusted earnings per share is shown in the table below:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 2024 2023

Diluted earnings per share $ 0.67 $ 0.55 $ 1.22 $ 1.19

5 unchanged sentences

(a) Primarily comprised of one-time expenses related to Information Technology, warehousing and Human Resources separation costs and the related tax impact of those expenses.

The tax impact of one-time separation costs for the three months ended March 31, 2024 and 2023 were $1.3 million and $1.0 million, respectively.

The tax impact of one-time separation costs for the three months ended June 30, 2024 and 2023 were $0.8 million and $2.2 million, respectively, and for the six months ended June 30, 2024 and 2023 were $2.1 million and $3.1 million, respectively.

A reconciliation of Net cash provided by operating activities to Free cash flow and Adjusted free cash flow is shown in the table below:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2024 2023 2024 2023

(in millions)

Cash (used in) provided by operating activities $ (8.2) $ 42.8

Cash provided by operating activities $ 22.9 $ 46.2 $ 14.7 $ 89.0

Capital expenditures $ 11.6 $ 12.7 $ 22.2 $ 19.1

2 unchanged sentences

Other one-time separation related (a)

18.3 — $ 21.6 $ —

Adjusted free cash flow $ 34.1 $ 35.3 $ 21.4 $ 72.5

6 unchanged sentences

Our significant accounting estimates are described in the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023 .

There have been no material changes to our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements